LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Hawa Mahamoud and Eva Jean, GSK Stockmann
7.4 Rescue or Reorganisation Procedures Other Than Insolvency Following the adoption of the Reorganisation Law, cer- tain reorganisation procedures which were previously available under Luxembourg law have been removed (specifically, controlled management and preventative composition proceedings) and replaced by new pro- cedures which are described in detail below. In-Court Amicable Arrangement A company can engage in out-of-court negotiations with at least two of its creditors to reorganise all or part of its assets or operations. Once the debtor and credi- tors reach an amicable agreement, the debtor may apply to the court for certification, which, if granted, makes the agreement legally enforceable. The agree- ment remains confidential unless the debtor consents A company may request a collective agreement pro- ceeding, which allows them to negotiate a reorgani- sation plan with its creditors under supervision of the Luxembourgish courts. If the reorganisation plan pro- posed by the debtor is approved by the creditors, a Luxembourg court must decide whether it will homolo- gate the plan by considering, among other things, whether the plan satisfies the criterion of being in the best interests of creditors. Subject to any disputes arising from the implementation of the plan, the judg- ment which decides on the homologation closes the judicial reorganisation proceedings. It is published in the Recueil électronique des sociétés et associations (Electronic Compendium of Companies and Associa- tions) and notified by the registry to the debtor and the creditors. The judgement on the homologation of the reorganisation plan is subject to appeal within 15 days of its notification. Any creditor may request the revocation of the reorganisation plan where the debtor is manifestly no longer able to implement it. If the debtor is declared bankrupt, the reorganisation plan is automatically revoked. Court-Ordered Transfer The proceeding can be initiated either by the debtor, in their petition for judicial reorganisation or during the proceedings, or it can be requested by the Public Prosecutor, a creditor, or an interested party seek- to its disclosure to third parties. In-Court Collective Arrangement
ing to acquire the business. Upon initiation, a court- appointed agent ( mandataire de justice ) is designated. The agent’s primary role is to organise and execute the transfer or assignment of movable or immovable assets that are essential to maintaining the economic activity. The scope of the transfer is determined either by the court or by the agent, who bears the significant responsibility of assessing the viability of the business or its segments to be transferred. The agent prepares one or more transfer proposals, which must be pre- sented to the appointed judge and the debtor at least two days before the hearing. Suspension of Payment This procedure is governed by the Luxembourg Com- mercial Code ( Code de Commerce ) and remains unaf- fected by the Reorganisation Law. A reprieve from payments of a commercial compa- ny can only be applied to a company that, because of extraordinary and unforeseeable events, has to temporarily cease its payments but that has, on the basis of its balance sheet, sufficient assets to pay all amounts due to its creditors. The reprieve from pay- ments may also be granted if, despite the applicant currently operating at a loss, there are compelling indi- cators suggesting a likely return to a balanced finan- cial state between its assets and debts. The purpose of the reprieve from payments proceed- ings is to allow a business experiencing financial diffi- culties to suspend its payments for a limited time after a complex proceeding involving both the Commercial District Court and the Cour supérieure de justice and the approval by a majority of the creditors represent- ing, by their claims, three-quarters of the company’s debts (excluding claims secured by privilege, mort- gage or pledge). The suspension of payments is, however, not for gen- eral application. It only applies to those liabilities that have been assumed by the debtor prior to obtaining the suspension of payment and has no effect as far as taxes and other public charges or secured claims (by right of privilege, a mortgage or a pledge) are con- cerned.
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